Plains All American Pipeline, L.P. PAA reported second-quarter 2015 adjusted earnings of 24 cents per unit, falling short of the Zacks Consensus Estimate of 25 cents by 4%. Quarterly earnings declined 47.8% year over year.
On a GAAP basis, the partnership reported a loss of 6 cents per unit compared with earnings of 45 cents in the second quarter of 2014. The variance between adjusted and GAAP earnings was due to the combined impact of charges related to long-term inventory valuation adjustments, loss from foreign currency revaluation, expenses related to cleanup due to oil spill from its 24-inch pipeline (Line 901) in Santa Barbara County, CA, deferred income tax expense, and tax effect on selected items.
The disappointing results led to a 10.6% fall in the partnership’s units till the closing session yesterday.
Total Revenue
The partnership reported total revenue of $6,663 million, exceeding the Zacks Consensus Estimate of $6,661 million by a slight 0.03%.
Reported revenues however plunged 40.5% year over year due to lower sales at the partnership’s Transportation (down 2.4%), Facilities (2.9%) and Supply & Logistics (41.5%) segments.
Operational Update
Plains All American’s total cost and expenses went down 40.4% to $6,454 million over the prior year primarily due to lower purchases and related costs (down 43.1%), and general and administrative expenses (12.2%).
The partnership’s operating income plunged 42.7% to $209 million from $365 million a year ago.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) came in at $486 million in the second quarter, down 5.1% from $512 million a year ago.
Interest expenses (net) soared 28% year over year to $105 million from $82 million a year ago.
Financial Condition
As of Jun 30, 2015, Plains All American’s current assets were $3,944 million compared with $4,179 million as of Dec 31, 2014. Long-term debt was $9,137 million compared with $8,762 million as of Dec 31, 2014. The long-term debt-to-total book capitalization ratio at the end of the quarter was 51% compared with 52% at the end of 2014.
In first-half 2015, the partnership’s cash flow from operating activities was $660 million, down 31.5% from $963 million in the prior-year period.
Cash Distribution Update
The partnership declared a cash distribution per limited partner unit of 69.5 cents, up 7.8% from the previous year’s payout. This distribution translates to a payout of $2.78 per unit on an annualized basis.
Guidance
Plains All American lowered the mid-point of its full-year guidance for adjusted EBITDA by $50 million to $2.3 billion.
Zacks Rank
Plains All American currently holds a Zacks Rank #3 (Hold). Some better-ranked master limited partnerships in the oil and gas pipeline industry include Valero Energy Partners LP VLP, sporting a Zacks Rank #1 (Strong Buy), and Buckeye Partners, L.P. BPL and CONE Midstream Partners LP CNNX, each carrying a Zacks Rank #2 (Buy).
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